FOMC Insanity And Other Silly (and Dangerous) Things - UPDATED

So yesterday we get the fabled "one and done", so called.

Anyone remember that we were told it would be "one and done" back last summer?

Do the "crooners" really expect us to believe it a second time, after being told the check was in the mail in the summer - and finding out that it was made out of rubber?

So what did The Bulls really expect yesterday? Something in the statement that said "its all ok, the economy is turning around"? You must be kidding, right? There's nothing in the economic data that suggests this, but it appears, from the market's reaction, that was exactly what it was demanding to see in order to produce a continued rally.

You know when the FOMC will have credibility? When it acts - and not before. So far Ben and the rest of the FOMC have not given a damn about the effects of their actions on the world economy, nor, indeed, on anything beyond their "humongous bank and brokerage" (HB&B) - hattip to Bill Cara for the term - buddies for whom everything is calibrated and done.

Far from being a watchdog of economic growth and price inflation, the FOMC has in fact one mandate that they follow - keep their buddies reporting bubble earnings as long as possible by continuing to run Ponzi Finance games one after another, picking up the pieces of one collapse with the fuel shovelled into the furnace of the next.

This whole "scam 'em until they all die and you all run out of food" game started with the repeal of the last pieces of Glass-Steagall, and the banks immediately recognized that they could lever up with wild abandon so long as they were big enough, then cry "too big to fail" when they got in trouble - and we'd respond by protecting them from the just desserts of their stupidity - at our expense.

This morning Sheila Bair is on Bubble TV talking about her plan to play "let's have Treasury recapitalize the banks with yet another hairbrained bubble scheme."

Her justification for this is, ironically, is that "if we just let them foreclose you'll have an empty house for 10 months due to the overhang in supply."

What is Sheila's background in economics?

There is one simple solution to inventory overhang that works every single time and works immediately.

That is to lower prices.

But see, Sheila doesn't like that answer. Why? Because, well, she wants her cake and would like to eat it too. That, unfortunately, is impossible. Distorting the market will actually make the problem of inventory overhang worse because, as I noted, it will drive the cost of money higher (thus driving the value of homes lower) and at the same time it will give sellers "hope" that they will not have to drop their prices.

As such it will push demand and supply in the wrong directions - simultaneously.

This is in fact eerily similar to the "stimulus check" stupidity that is now running rampant across the nation. We are told to go out and buy a new flatscreen TV with our $600, but what we're not told on Bubble TV is that its not a $600 "Gift" from Uncle Fed, its really just taking money out of your wallet, extracting the inefficiency of government, then sending it back.

As I noted in the video below the truth is far uglier than put forward



But nobody wants to talk about that eh?

That's because we don't talk about compound interest, compound earnings, and why you can't spend more than you make for any material amount of time.

So in fact this "stimulus" isn't; its yet another example of Ponzi Finance courtesy of our government, ladled up as yet another dollop of debt and having an actual net negative impact on the consumer's balance sheet. It is yet another attempt to "have a hamburger today that I will pay you for tomorrow", but like Wimpie, tomorrow, when the check is to be paid, never comes.

Personal income up 0.3%, spending up 0.4% last month. Was that real? Who knows.

But jobless claims were up 35,000 to 380,000. That's an actual counting function, so I guess we can trust those numbers. Maybe. Continuing claims exceeded 3 million, a benchmark not seen since the last recession ended in 03. Of course we know its really worse than that, right? After all, they don't count illegal immigrants, and who was building all those houses? Yep.

If you're not outraged enough about bank book cooking yet, here's yet more! A US Representative, one Gary Miller, is a real-estate developer. Guess what he got inserted into the House bill trying to "help" people refinance subprime mortgages?

Yep, you guessed it - another attempt to force people to NOT mark to market.

"In other words, let's see if we can get banks to lend more money by letting them show more capital than they actually have."

Niiiice.

The good news is that the media is finally getting it, and finally getting outraged. Bloomberg's Jonathan Weil's answer in the referenced column can be easily summed up as this:



Its about time we started seeing that response in the media. May we see much more of it.

The conference board's Help Wanted Advertising Index fell to 19, which is a leading indicator of the economy - and it ain't good. Declines were registered in all regions.

First Federal (NYSE: FED) may have been playing with the numbers in its earnings report. It appears that they used OFHEO numbers for Los Angelas, instead of ALTA - the official title folks. With the latter, the loss reported would have been materially higher. Will the games never stop? I thought that SarBox was supposed to stop this sort of nonsense?

Laws only work when they're enforced.

Kuwait is warning us that the Gulf States are likely to drop their currency pegs to the dollar. Well, duh. Bernanke has been exporting monetary inflation to these folks and they're (rightfully) pissed off about it. I'm sure they're real happy about the $200 billion in "bubble hot money" he has unleashed into the banking system that has immediately driven commodity prices to the moon too. I'm looking forward to some severe pushback against this stupidity; it appears that the only way to get the attention of these folks is to hit them upside the head with a 2x6 - a 2x4 doesn't have enough mass to make your point!

Oh, and if that's not bad enough, the recent departure of high-ranking people at pension managers - including big ones such as CALPERS, leads one to wonder - is something ticking out there in California? That would be bad, right?

If McCain wants any chance of winning in November, he's going to have to break from this stupidity here and now and start talking about these issues and what he's going to actually do to fix it. So far I've heard nothing out of any of the candidates that speak to meaningful changes in the "Ponzi Finance Everywhere!" schemes.

The problem is that every new bubble requires a bigger base of suckers as its foundation, and we're out of suckers. The Housing Bubble used a base of about $30 trillion, and there simply isn't a larger base available in the economy.

Game's up kids, and the candidate that faces this and starts speaking the truth - about entitlements, about our financial system, about living beyond our means - and who promises not "raise taxes and spend twice as much!" or "cut taxes and send deficits to the moon!" - but rather the truth - wins in November.

Bubblenomics has been the mantra of BOTH political parties but Grandma can't take any more of it, and neither can our middle class.

Do we need another political party focused on the truth?

Would America vote for such a candidate, or are the "free lunch now!" folks firmly in control?

One wonders.....

Next up - Dick Bove was once again on the air this morning and one of the sentences that passed his lips, if I heard it correctly, was that Citigroup (NYSE: C) was "up 22% this year."

Really?

Well, its up 40% from the bottom, but this year?

Here's a chart. You decide if Mr. Bove was playing games with the definition of when "this year" starts and ends, and what your performance would have been.



12/31/07 close, $29.44. Last night (to be fair, since when he was on the stock had not yet traded today in the "real" session) closing price, $25.27.

The math is left as an exercise to the reader, as is the veracity of his claim. If I get to retrospectively pick dates to make my calls work I can be accurate all the time too.

Of course trying to invest on that thesis without a HG Wells (or "Doc") style time machine might prove to be slightly more difficult.

For my part, I wrote the SEC at enforcement@sec.gov a nastgram about this, and I suggest you do so as well.

We also have rumblings flying around about deficiency notices coming into and going out of Pension Funds from both a steelworkers and longshoreman's unions.

This is an extremely serious matter and totally unappreciated in the market.

See, these funds were sold (and eagerly bought) a lot of this crap paper. CDOs, SIV "commercial paper" and similar trash. All served up by the Wall Street Boyz.

If you have a defined-benefit pension of any sort, whether you're a teacher, a union worker or otherwise, you may have a very serious problem that is not yet formally recognized by you - but it will be, and with disastrous consequences.

Anyone who was wondering if this "credit crunch" and "The Era of Fraud and Ponzi Schemes" was going to hit Joe Sixpack right in the wallet, or whether this was just another "LTCM" type of bump in the road, you should be aware that not only is this going to hit Joe, its going to flatten him.

Essentially NONE of these losses have yet been recognized and reported. Zero, zip, nada, nothing. Yet these losses will be ruinous for millions of Americans, who are having their retirement security destroyed outright while Wall Street has reaped billions of dollars in bonuses.

You who think that Joe "won't care" need to wake up and get off your duffs - and head straight over to http://www.house.gov/ or http://www.senate.gov/, look up your Rep and Senators, and get on the phone.

The message needs to be loud and clear - the fraudsters in our financial industry need to be indicted, prosecuted, and jailed, with the illegally-gotten profits that they gained recaptured via asset seizures to the maximum extent possible, including not only from the executives but from the firms themselves.

But heh, its only YOUR retirement (or your Teacher, Longshoreman and Teamster) buddies that are at risk, right, and Dick Bove says you should buy the banks - you know, those same folks who created and profited from this insane Ponzi Scheme.

Got it.

The Consumer is ok? Uh huh. Try again:

"Statistics show that about 35 percent of all credit card holders are already exhibiting signs of possible default. Late credit card payments result in fees many consumers can't afford.

Credit card debt accelerated to unprecedented heights since bank loans began to dry up due to mortgage defaults. Total U.S. credit card debt reached almost $800 billion in November 2007, up from around $680 billion in March of last year, according to the latest available government statistics. "

35 percent eh? Note that about half of all cards are paid in full every month, so if 35% of all cardholders are at risk of default, that means that about 65% of all who carry a balance are.

Let me guess - that's bullish, right, and it has been widely reported in places like CNBC.

Oh wait - that hasn't been reported on CNBC at all?

Why not?